From Financial to Real Economic Crisis: Evidence from Individual Firm-Bank Relationships in Germany

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. firms. For the analysis we match individual firm and bank financial statements in Germany using information about individual lending relationships. The data include small and medium sized firms. Using IV estimations in first differences to eliminate firm-and bank-specific effects, we find that banks which experience losses from their proprietary trading activities cut back lending, and firms whose relationship banks reduce lending decrease real investment. Terms of use: Documents inBank losses from proprietary trading during the crisis caused a decrease in the net real investment rate of their business customers by 20% through the reduction of credit supply, independent from demand effects. The effect is larger for firms unable to provide much collateral. We also document that firms can partially offset reduced credit supply by their relationship banks by resorting to self-financing and by establishing new bank relationships.

Homogeneity of Determinants in the Financial Sector and Investment in EU Countries

“…Conversely, Akbar et al (2013) find a relationship between credit supply and business performance and investment. The relationship between GDP and the volume of loans and investments of non-financial institutions is also evident in other European Union countries, and this assumption can be generalized, thus confirming the economic theory predicting this relationship, but also between banks and companies (Braggion and Ongena 2013;Amore et al 2013;Dwenger et al 2015). An exceptional deviation is shown by Luxembourg and also Cyprus.…”

Disentangling the Effects of a Banking Crisis: Evidence from German Firms and Counties

“…In contrast, Christiano, Eichenbaum, and Trabandt (2015) and Beraja, Hurst, and Ospina (2015) calibrate models that show supply-side shocks, such as financial frictions, best account for the growth pattern. In the German setting, Dwenger, Fossen, and Simmler (2015), Hochfellner et al (2015), and Popov and Rocholl (2015) argue that banking shocks have real effects. Ashcraft (2005) speculates that a reason for the different findings may be that small, regional differences in exposure to bank shocks are not informative about the consequences of a large, systemic lending cut.…”

Tracing the International Transmission of a Crisis through Multinational Firms

“…In German, relationship banks are called “home banks” ( Hausbanken ), which highlights the tight ties between borrowers and banks. Bank‐firm relationships are long‐lasting, as each year only 1.7% of firms add a new relationship bank (Dwenger, Fossen, and Simmler (2015)). The most common services provided by relationship banks are loans and payment transactions (Elsas (2005)).…”